Pipeline plan changes could mean new issues

• A different route to avoid a major aquifer would mean adding to the oil pipeline's length and price tag.

BILLINGS, Mont. — The White House plan to seek alternate routes for a Canada-to-Texas oil pipeline presents a tangle of new problems for the project's backers, and any of those obstacles could sink the proposal before the first spade of dirt is turned.

Shifting the path to avoid a major aquifer could increase the number of perilous stream crossings and put the line closer to populated areas. Major changes also risk alienating pipeline supporters, who tout the economic benefits of creating thousands of jobs. And the most vocal opponents plan to keep up their fight regardless of the route.

The obstacles are tall enough, some observers say, that Canada's oil-sands industry could decide to bypass U.S. markets altogether and sell fuel directly to China using a pipeline through western Canada to the shores of the Pacific.

TransCanada's $7 billion Keystone XL pipeline would carry up to 700,000 barrels of crude a day from Alberta's tar sands to Gulf Coast refineries. The original route crossed six states, including Nebraska, where opponents are worried about threats to the massive Ogallala aquifer. The line also would pass through Montana, South Dakota, Kansas and Oklahoma.

Largely because of complaints from Nebraska, the State Department agreed Thursday to look for new routes that would steer clear of the state's Sandhills region and the aquifer, which flows beneath eight states and provides irrigation to huge farming areas. That effort will delay a final decision until early 2013.

TransCanada's director of field operations, Jim Krause, declined Friday to go into any detail about possible alternative routes.

"We only got the news late (Thursday)," Krause said. "We're mulling a lot of things."

Thirteen alternate routes were reviewed and rejected by the State Department over the past three years. Among those were paths to follow an existing TransCanada pipeline that roughly tracks the Canadian border east from Montana across North Dakota and then turns south to go through eastern South Dakota and Nebraska.

That option, favored by Nebraska's governor, passes through a much smaller portion of the Ogallala aquifer. But it was rejected in part because the route is longer and would have raised the project's price tag by about 25 percent, or an estimated $1.7 billion.

Also rejected were two routes that paralleled a stretch of I-90 in South Dakota to avoid the Sandhills. Those would have cost almost $500 million more and involved putting the line through more densely populated areas and across more streams and rivers that could be fouled if the conduit broke or leaked.

Two western routes that passed through Wyoming and Colorado were thrown out because they would have added several hundred miles to the line, again making it more expensive.

An industry consultant who headed the federal pipeline safety agency under the Bush administration said any changes probably mean building a longer pipeline than TransCanada originally planned. That could expose the project to still more objections because a longer pipeline has more points at which it can fail.

"You could set this pipeline up for a death by a thousand cuts: Next year, the new route's not good enough," consultant Brigham McCown said.

"I'm very skeptical about the fairness of the process at this point."

The environmental group Friends of the Earth has sought a broader government review that would address national energy policies and whether it is in the country's best interest to expand the use of a fuel considered more environmentally damaging than conventional oil.

"I don't think there is an alternative route that solves the problems of this project," said Damon Moglen, the group's climate director.

But a wider review was rejected by Assistant Secretary of State Kerri-Ann Jones. She told reporters Thursday the process would focus on alternative routes.

Jones also ruled out any significant changes to the pipeline path outside of Nebraska, saying that for now the agency's review will be limited to that state.

Kevin Cramer, chairman of the agency that regulates North Dakota's pipeline industry, said there is fear that TransCanada could scrub its plans to build the pipeline through the Midwest and instead build one through western Canada to ports on the Pacific, where the crude could be shipped to overseas markets.

TransCanada had faced political pressure to let U.S. oil companies tap into the Keystone XL, which under the previously selected route would pass through or near rich oil fields along the Montana-North Dakota border.

Montana Gov. Brian Schweitzer had threatened to hold up Keystone's 280-mile route through his state if builders did not agree to an "on ramp" that would take domestic crude south. Sen. John Hoeven, a North Dakota Republican, also pushed for access to the pipeline. The company announced in January that it would accept crude from both states.

North Dakota is the nation's No. 4 oil producer and is projected to surpass California and Alaska in the next year, trailing only Texas.

Mark Lewis, a partner in the Bracewell and Giuliani law firm who represents pipeline developers, owners and operators, said any new route will be fraught with potential environmental problems. And of course, the rerouting might cost too much.

"If you have to reroute it through a more developed area, that becomes more expensive just to acquire the rights of way," Lewis said. "The best place, just from a pipeline perspective, is open, rural land."

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